Estonian tax basics

The Estonian Tax and Customs Board (EMTA) is the agency governing taxation. Their website is a great resource as they have a section specifically to cover e-Residency tax information. The Estonian state portal, eesti.ee, also provides an explanation of the full tax system.

Below is a short overview covering the questions we hear most often when we meet e-residents. First and foremost, it is important to note there is a difference between your personal tax obligation and your corporate tax obligation.

Personal tax residency 

Regardless of your e-Residency status, you must always pay personal tax in the country in which you are a tax resident. E-Residency does not mean you are an Estonian tax resident.

A person is regarded an Estonian tax resident if their place of residence (the place where they permanently, or primarily, live) is in Estonia or if they have lived in Estonia for at least 183 days over a consecutive 12-month period. Learn more on the EMTA website.

If you are location-independent, you should understand the tax system of your home country and any country in which you work for an extended period of time. Everyone's personal tax situation is unique, so we strongly recommend you seek professional tax advice in your home country or from an expat specialist.

Corporate tax residency 

In general, if business activity is conducted online and you receive income from around the globe, your Estonian OÜ is a corporate tax resident of Estonia. 

In Estonia, tax is not assessed on profit earned every year. Income tax is assessed on a monthly basis and only when profits have been distributed. The corporate tax rate is generally a flat 20%, calculated as 20/80 from taxable net payment. Since 2019, if regular dividends are paid out, a reduced rate of 14/86 applies instead.

However, if your business activity is conducted physically in a different country, your company is likely to be taxed in that country.

Only income derived in Estonia is taxed in Estonia. If there is no activity or income derived from Estonia, taxes should be paid in the country where the service is provided or activity is done or income is derived from, e-Residency alone does not influence taxation.

When your company activity creates a permanent establishment in a given country, the business profit attributable to this permanent establishment is taxed in that country (where the value is generated). It is your company's duty to explore its obligation to, and pay, taxes in accordance to the law in any country where you do business. A few of the service providers in our Marketplace can advise on international taxation. For more complicated situations, you may want to contact a tax consultant familiar with Estonian law and/or a tax consultant based in the relevant country.

An Estonian e-resident company can generally prevent double taxation if business activity is conducted abroad. For example, if profits that are taxable abroad are paid out as dividends in Estonia, these profits might be tax-exempt in Estonia.

Although international taxation is complex, having e-Residency can make the tax paying process more transparent and easy through e-services available in Estonia. For example, if you do owe corporate taxes in Estonia, you can declare all taxes entirely online.

Learn more about corporate taxation on the EMTA website.

VAT registration

If your annual taxable turnover is below €40,000, VAT registration in Estonia is not obligatory. Learn more about VAT registration.

More information

We strongly advise e-residents to consult a qualified tax professional in order to determine personal and corporate tax obligations. Visit out Marketplace to find a few of the taxation consultants who have a good understanding of e-Residency and, specifically, Estonian corporate taxes.

You can also read more on Estonian taxation on our blog in a piece written by the Head of the Estonian Tax Department.

For further questions on taxation in Estonia, please visit the Estonian Tax and Customs Board website or contact them directly via e-mail: nonresident@emta.ee

 

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